Letters of credit
A Letter of Credit record holds a documentary credit exactly as the bank writes it, field by field with its SWIFT tag. In a back-to-back trade there are two: the sale (export) credit the buyer's bank opens in your favour, and the purchase (import) credit you open for the supplier. The app checks each against its contract, prices the banks' quotes, reserves the facility limit, works out the deadlines and checks the documents against the credit's own conditions.
To open the list: Trade Finance › Credits › Letter of Credit (/palbon-trade-finance/credits).
1. Prerequisites
- The trade and its signed leg contract.
- The banks, and an Active bank facility for import credits.
- Roles: Trade Finance Executive (prepare, record), Trade Finance Manager (approve issuance, waivers, payment).
2. Kinds of credit
| LC Type | You are | Workflow path |
|---|---|---|
| Export (Sale) | Beneficiary: the buyer's bank pays you | Draft → Advised → (amendments) → Presented → Accepted → Paid → Closed |
| Import (Purchase) | Applicant: your bank pays the supplier | Draft → (Bank Quotes) → Pending Issuance Approval → Approved for Issuance → Issued → (amendments) → Presented → Accepted → Paid → Closed |
| Standby | Either | A standby credit under ISP98 or UCP 600 |
The sale credit usually arrives first, so the purchase credit can be opened against it.
3. The fields
| Section | Fields (SWIFT tag) |
|---|---|
| Header | Title, LC Type, Trade, Company, Status, LC Number (20), Applicable Rules (40E): UCP 600, eUCP, ISP98, URDG 758 |
| Parties and Banks | Applicant (50), Beneficiary (59), Issuing Bank (52A), Advising Bank, Confirming Bank, Bank Facility, Back-to-Back Pair (the other leg's credit), Amendment Pending |
| Amount and Terms | Currency and Amount (32B), Tolerance (39A, +/-), Maximum Amount (amount × (1 + tolerance)), Available By (41A), Tenor (42C) Sight or Usance, Usance Days, Usance Counted From, Partial Shipments (43P), Transhipment (43T) |
| Dates | Date of Issue (31C), Latest Shipment (44C), Expiry (31D), Place of Expiry, Presentation Period (48, days after B/L), B/L Date, Presentation Deadline, Discrepancy Fee per Set, Port of Loading (44E), Port of Discharge (44F), Goods (45A) |
| Bank Quotes | One row per bank (import credits) |
| Payment Schedule | Tranches (for example 30% at sight, 70% 90 days after B/L) |
| Additional Conditions (47A), as Checks | Each 47A clause as a rule the document checks apply |
| Documents Required (46A) | Each document with originals, copies, issuer, conditions, status |
| Amendments (MT707) | The amendment history |
| Check against the contract | Contract check, Checked on, Differences from the contract |
| Charges and drafts | Charges (71D), Charges outside the issuing bank borne by, Drafts at (42C), Drawee (42A) |
Dates are checked: The credit expires before it is issued; The latest shipment date is after the expiry.
4. The sale (export) credit
4.1 Record it from the bank's MT700
The quickest way is to paste the SWIFT text the advising bank sends:
- Trade Finance › Credits › SWIFT Message, New.
- Message: MT700 (MT701 for continuation pages), Direction: Incoming, paste the full text into Message Text, save. The app reads every field: Fields Read shows them; Problems Found lists any mandatory field missing (Field 31D is missing). The message moves to Parsed.
- Actions › Apply to the letter of credit. A new credit is created (or the credit with the same LC number is updated) with the amount, dates, parties, tenor, ports, goods, 46A documents and 47A conditions. A credit received from a bank is an Export (Sale) credit.
- Open the credit, set its Trade, check the values and save. Mark the SWIFT message Applied.
You can also type the credit directly into a new Letter of Credit, or use Fill from a document on the form with the bank's PDF.
4.2 Check it against the sale contract
When an export credit is first saved with its trade, the app compares it with the sale contract. Actions › Check against the contract runs it again at any time. It checks:
| Term | Rule |
|---|---|
| Currency (32B) | Same as the contract |
| Amount (32B) | At least price × quantity |
| Tolerance (39A) | Same as the contract |
| Latest shipment (44C) | On or after the laycan end |
| Presentation period (48) | At least the contract's presentation days |
| Expiry (31D) | No earlier than the laycan end + presentation days |
| Tenor (42C) | Sight for LC at Sight, usance for LC Usance |
| Port of loading (44E) | Names the contract's load port |
| Goods (45A) | Names the commodity (a note, not a mismatch) |
| Applicant (50) | Names the buyer |
| Partial shipments (43P) | A note when allowed but the contract has no tolerance |
Contract check shows Matches or Mismatches and Differences from the contract lists each one, for example Tolerance (39A): credit 5%; contract 10%.
4.3 Accept it or ask for an amendment
- If it matches, click Record Advice of Received LC: the credit is Advised and live.
- If not, click Request Amendment (from Advised) and ask the buyer to amend through their bank. When the bank's MT707 arrives, apply it (see Amendments and SWIFT messages) and click Record Advised Amendment.
5. The purchase (import) credit
5.1 Draft it
- Automatically, when the rule Draft the purchase LC when a trade is confirmed is on.
- Manually: New Letter of Credit, LC Type Import (Purchase), the trade, applicant (your company), beneficiary (the supplier), amount, tolerance, dates, tenor, ports, goods, payment schedule.
- From the sale credit: set each credit's Back-to-Back Pair to the other. With the rule Copy the sale LC's documents and conditions into its purchase LC on, when the sale credit is Advised its 46A documents and 47A conditions are copied into the purchase credit, so the supplier's documents also satisfy your buyer. If the copy fails, the advice stops, because the two credits must match.
Send the draft to the supplier for review with Print › LC Application (or Download PDF).
5.2 Bank quotes
Click Seek Bank Quotes (state Bank Quotes) and add one row per bank in Bank Quotes: Issuance % per Quarter, Confirmation %, Usance Interest % p.a., Fixed Fees, Valid Until. On save the app works out each bank's All-in Cost:
all-in cost = maximum amount × (issuance % × started quarters of validity + confirmation % + usance interest % × usance days / 360) + fixed fees
Tick Selected on one quote (only one may be selected); its bank becomes the Issuing Bank.
5.3 Facility check
Choose the Bank Facility. When the credit is approved or issued, its Maximum Amount (amount plus tolerance) must fit the facility's available limit, counting every other live credit on it. If not: USD 4,266,900.00 with tolerance takes facility BF-00001 past its limit (… available).
5.4 Approve and issue
| Step | Action | Who |
|---|---|---|
| Draft or Bank Quotes | Submit for Issuance Approval | Trade Finance Executive |
| Pending Issuance Approval | Approve Issuance (maximum amount up to 5 million) / Approve Large Issuance (above 5 million) | Trade Finance Manager, not the requester |
| Pending Issuance Approval | Return for Changes | Trade Finance Manager |
| Approved for Issuance | Record Bank Issuance | Trade Finance Executive |
Before Record Bank Issuance, enter the LC Number (20) and Date of Issue (31C) from the bank's MT700 and attach the bank's copy. Actions › Write the MT700 makes an outgoing MT700 draft from the credit (a SWIFT Message to review and send to the bank).
The risk gate stops approval or issuance when the beneficiary (or applicant) is under a confirmed sanctions match or was rejected at KYC (… cannot go ahead: … is under a confirmed sanctions match), and warns when a potential match is still to be reviewed.
When the credit becomes live, the app records an Exposure Movement that reserves its maximum amount on the facility.
6. Deadlines
When the voyage records the bill of lading date, it reaches the credits of the trade:
- Presentation Deadline = B/L date + presentation period, never later than the expiry.
- Payment tranches get their due dates (at sight: the presentation deadline; days after B/L; days after sight; fixed date).
Example: B/L dated 21 Sep 2026; purchase credit 7 days → presentation by 28 Sep; sale credit 14 days → presentation by 5 Oct.
Two reminder rules are on by default: Tell trade finance 3 days before a presentation deadline and Tell trade finance when a credit expires within 7 days. Copy the first for a D-1 reminder. Trade Finance › Reports › Credit Deadlines lists every live credit with its shipment, presentation and expiry dates and the days left.
7. Payment schedule
Payment Schedule rows: Share (%), Due (At Sight, Days after B/L, Days after Sight, Days after Invoice, Fixed Date), Days or Date. The shares must add up to 100% (The payment tranches add up to 90%, not 100%). Each row's Amount and Due Date are worked out; mark a tranche Paid when it is received or paid.
8. Charges
Charges (71D) is read from the credit (for example ALL CHARGES OUTSIDE THE ISSUING BANK ARE FOR BENEFICIARY'S ACCOUNT, or REFER FIELD 47A with the clause there), and Charges outside the issuing bank borne by is set to Applicant, Beneficiary or Shared. Bank charges deducted on a presentation reduce the proceeds and the trade's realised margin.
9. From presentation to closing
| Step | Action | Who |
|---|---|---|
| Issued / Advised | Present Documents | Trade Finance Executive, Documentation Executive |
| Presented | Accept Documents / Mark Discrepant | Trade Finance Executive |
| Discrepant | Re-present Corrected Documents | Trade Finance Executive, Documentation Executive |
| Discrepant | Accept with Applicant Waiver | Trade Finance Manager, not the requester |
| Accepted | Record Payment | Trade Finance Manager, Treasury Manager |
| Paid | Close | Trade Finance Manager; the facility reservation is released |
| Draft / Bank Quotes | Cancel | Trade Finance Manager |
The examination itself is kept on an LC Presentation: see Presentations and payment.
10. By voice or text
Show LCs expiring in 14 days, How many letters of credit are issued?, What is the expiry date of LC ACB/LC/26/0108, New letter of credit.